Ashok Leyland is the second largest manufacturer of commercial vehicles in India with a 28% market share. It has plans to double its production capacity of 84,000 vehicles by 2010 through expanding its 6 existing plants and opening a new one. The company operates in multiple vehicle segments including buses, trucks, and defense vehicles. While the auto industry has faced difficulties due to economic factors, Ashok Leyland has performed well with revenue growth of 7.81% and PAT growth of 29.11% in FY2008. However, rising fuel and raw material prices as well as interest rate hikes pose concerns for the future.

1. ASHOK LEYLAND LTD. Company Analysis 6 sep 2008

2. Ashok Leyland – Business Overview 5000 Crore Company in Indian CV Industry No. 2 Manufacturer or Commercial Vehicles Market Share 28 % and No 1 in bus segment Current capacity of 84000 Vehicles which would be doubled by 2010. 6 plants and another 1 coming up at Uttaranchal PRODUCT SEGMENTS Buses TRUCKS DEFENCE VEHICLES, Spares Entering into Design & OEM services

3. Indian Automobile Industry - overview Auto companies continue to reel under pressure on the back of turbulent macro economic factors BSE Auto Index turned in a relatively better performance in FY2008 underperformed the broader markets by 6.8% while the Sensex lost ground by almost 14%. However, during first quarter of 2009, the Auto Index declined another 20.8% after the 20.2% fall witnessed during 4QFY2008

4. Growth Divers Strong Performance of Indian Economy Regulations on overloading and over-aged vehicles will be Tightened Private bus demand will continue to grow with better road connectivity Efficient Infrastructure Investments Golden Quadrilateral Project 5864 Kms NSEW corridor Project 7300 Kms Port Connectivity & others 1016 Kms 48 New Project covering more than 10000 Kms coming up source : NHAI

5. Concern Areas Inflation, Interest Rates & Liquidity RBI hiked CRR by 125 bps & Repo by 75 bps in last 3 months so financing rates gone up by 300 bps YTD Conversion Ratio dropped by 45 % in last 4-5 months Fuel Price Hike Fuel Accounts for 25 % & 50% for total ownership cost of PV’s & CV’s Almost 15% Hike in Fuel Prices In 2008 direct impact on the ownership cost, freight operator's profitability and volume growth of the Auto sector Soaring Raw Material Prices Accounts for 70 % of total cost for Manufacturers Prices on a upward trend since last 2 years Badly affecting the margins as these costs cannot be passed on to customers due to high competition

6. Impact of Interest Rates

7. Ashok Leyland – Shareholding Pattern

8. Ashok Leyland Capacity Expansion plan

9. Financial Performance FY07 FY08 Change Revenues Rs. Cr 8514 9179 7.81% EBITDA 708 895 26.48% EBIT 555 721 29.75% PAT 364 469 29.11% EPS 3.33 3.53 6.01% ROCE 16.87 20.11 19.20% DPS 1.5 1.5 Margins Operating Profit margin 9.32 10.09 Gross Profit margin 7.27 7.86 Net Profit margin 5.94 5.83

10. Peer Comparison Ashok Leyland Tata Motors Swaraj Mazda CMP 34 (Face Value = 1) 420 296 P/E 9.61 8.64 10.83 NPM % 5.83 6.96 3.75 Last Dividend 150 % 150 % 55 % EPS 3.53 49.65 24 ROE 22.3 25.98 27 ROCE 20.11 19.8 21.50

11. Valuation CMP = 34 FCFF Valuation 44.44 (Undervalued) Weighted Average Method 52.78 (Undervalued) PV method 30 (Over Valued)

12. Valuation - FCFF

13. THANK YOU Enquires & comments R S Raghav ICFAI Business School [email_address]